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Monday, October 06, 2003

More US Labour Market Data to Chew On

Uncertainty over the state of the US labour market continues. Confounding those who felt that the household survey might be flagging a rather better than expected tendency, this latest Labour Department warning seems, on the face of it, to confirm the establishment data. We are talking about last year's data here, so it is difficult to draw andyhard and fast conclusions about the immediate future.

A warning by the U.S. Labor Department that it expects to revise down past employment data pours cold water on the view of some economists who believed the jobs market had been improving for some time, analysts said on Friday. Statisticians at the Labor Department said they expect to revise down U.S. payroll employment by about 145,000 for the March 2003 reference month -- effectively showing even greater weakness in the sluggish labor market than previously thought.

The downward adjustment surprised Wall Street, which had been rife with speculation this week that Labor would adjust the figures up, bringing payrolls more in line with another survey which has shown a recent improvement in the job market. "The expectation was that this revision would be positive, that we would be looking at a number in excess of 300,000," said Anthony Chan, chief economist at Banc One Investment Advisors. An upward revision would have brought the so-called establishment survey, a poll of businesses that has shown a loss of 1.0 million jobs since the recession ended in November 2001, more in line with a smaller household survey of employment which has shown a 1.4 million job gain.

Both surveys are part of the department's closely watched monthly employment report. Markets tend to focus on the payrolls count from the establishment survey, while the unemployment rate is derived from the household survey. The discrepancy between the two surveys has been a hot topic of late, even though veteran economists believe much of the discrepancy can be explained away by differences between the methods used in the two surveys and monthly volatility. Chan, who believes the larger establishment survey provides a more accurate picture of the job market, said the downward revision douses the argument that Labor was underestimating the job recovery with its establishment survey. "That gives more credence to the view that the weakness in the establishment non-farm payrolls is real," Chan said.

James Glassman, senior U.S. economist at J.P. Morgan Chase Securities in New York, said the revision is equivalent to about 12,000 fewer jobs a month than originally thought in the March 2002 to March 2003 period. "Whichever survey you look at, employment has been pretty flat in the last two years, and there is no mystery why -- the economy has not grown (fast enough)," said Glassman. Like many economists, he argues the discrepancies between the two surveys can be largely explained by the different methods used. Unlike the establishment survey, the household survey includes farm workers, the self-employed, unpaid family workers, private household workers and people on unpaid leave among the employed, possibly boosting its count.

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